Two rates, one check
Alabama splits your qualified spend into two buckets. Payroll paid to Alabama residents earns 35%. Everything else that qualifies, meaning Alabama vendors, location fees, lodging, and nonresident payroll with Alabama withholding, earns 25%.
The rebate is claimed against the production company's Alabama income tax for the year the money was spent, and the excess is refunded. Most productions run through a single-purpose LLC with no Alabama income, so in practice this works like a refundable tax credit: you file, the state audits, the state pays.
Nonresident pay has limits. Under the office's administrative rules, the 25% rate applies to the first $1,000,000 paid to a nonresident above-the-line person and the first $500,000 paid to a nonresident below-the-line person, prorated by the share of their days worked in Alabama. Payments to a loan-out company follow the same limits. From October 1, 2026, loan-outs also have specific withholding and estimated payment requirements set by the Department of Revenue.
Qualified productions also get an exemption from the state portion of sales, use, and lodging taxes. County and city taxes still apply, so your hotel invoices won't drop to zero.
Worked example: a $1,000,000 feature
A 20-day indie shooting in Birmingham, with the DP, gaffer, and two leads brought in from out of state and the rest of the crew hired locally.
| Budget bucket | Spend | Rate | Rebate |
|---|---|---|---|
| Alabama resident payroll | $260,000 | 35% | $91,000 |
| Nonresident payroll, Alabama tax withheld | $180,000 | 25% | $45,000 |
| Alabama vendors, locations, lodging, catering | $390,000 | 25% | $97,500 |
| Out-of-state post, E&O insurance, legal | $170,000 | 0% | $0 |
| Total | $1,000,000 | $233,500 |
That's 23.35% of the total budget. The post and legal lines don't qualify because the work happens outside Alabama.
Scaling up to $5,000,000
| Budget bucket | Spend | Rate | Rebate |
|---|---|---|---|
| Alabama resident payroll | $1,100,000 | 35% | $385,000 |
| Nonresident payroll | $900,000 | 25% | $225,000 |
| Alabama vendors and services | $2,300,000 | 25% | $575,000 |
| Non-qualifying spend | $700,000 | 0% | $0 |
| Total | $5,000,000 | $1,185,000 |
The per-person limits start to matter at this size. If the nonresident director's fee is $1,300,000, only $1,000,000 of it goes in the 25% bucket. A $5,000,000 show is nowhere near the $20,000,000 project ceiling, but its $1,185,000 claim is about 5% of the state's $22,000,000 yearly pool, which every approved project draws from.
Applying, and the deadlines that follow
- Send the application to the Alabama Entertainment Office no later than 30 days before production activities start in Alabama. Include the budget, schedule with Alabama shoot days, key personnel, a working script, and evidence that most of the financing is in place.
- Begin principal photography within 90 days of approval. Extensions are discretionary and typically run no more than 30 days.
- Register with the Alabama Secretary of State within 60 days of starting work in the state.
- Within 60 days of wrapping in Alabama, return the sales tax exemption certificate. Deliver the final report within 120 days (a 45-day extension can be requested).
- Get a Certificate of Compliance from the Department of Revenue, then claim the rebate through My Alabama Taxes.
Where productions lose money
The annual cap runs on the state fiscal year, October 1 to September 30. Approvals late in a fiscal year compete for whatever is left, so talk to the office about timing before you lock a start date.
Residency paperwork is the most common leak. A local grip without a signed Declaration of Residency gets treated as 25% payroll instead of 35%. Collect the form with the start paperwork, not at wrap.
If you spend less than the application estimated, the office recalculates. The rules also date from a 2015 amendment, while the small-budget tier and the $22,000,000 cap came later, so confirm with the office which figures the current application uses.
Alabama against its neighbors
Georgia pays a 20% transferable credit plus a 10% uplift, with the same $500,000 minimum and no annual cap. On an all-local crew Alabama's 35% payroll rate beats Georgia's 30%, but Georgia's lack of a yearly cap makes approvals more predictable. Florida has no state rebate at all, only a sales tax exemption. Mississippi and Tennessee are the other nearby options.
To test a budget against these programs, run it through the incentive calculator, browse all state and country programs, or read how film tax credits work for the audit and cash-flow side.